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Cleaning House in Brazil

Beset with government scandals, President Dilma Rousseff is seeking to curb endemic corruption.

9:10 AM, Nov 21, 2011 • By JAIME DAREMBLUM
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Brazil

Are we living in “the decade of Latin America”? Inter-American Development Bank president Luis Alberto Moreno used that phrase in a July 2010 Financial Times op-ed. A year later, Mauricio Cárdenas, then a Brookings Institution scholar and now the Colombian mining and energy minister, raised the same possibility, noting that Latin America appears to be “entering a decade of considerable opportunity.” The Economist has marveled at “Latin America’s renaissance,” praising the “remarkable” economic and social developments that have occurred in countries long associated with poverty and backwardness.

Those developments, coupled with the weak U.S. economy, have affected Latino migration patterns. As journalist Soni Sangha recently reported, “An increasing number of Latin Americans -- documented and undocumented -- are choosing to return to their native countries, where political climates are stabilizing and their economies are growing.” In the past decade, observes Wall Street Journal correspondent Matt Moffett, per capita income in Latin America has jumped from $7,600 to $11,900. According to a Latin Business Chronicle analysis, the region will average 4 percent GDP growth over the next five years, while the United States will average 2.8 percent growth and the European Union will average 1.9 percent growth.

The single biggest factor driving all the optimism about Latin America’s economic potential is the explosive rise of Brazil, whose economy grew by 7.5 percent last year. According to government figures, the Brazilian middle class added 24 million new members between 2003 and 2009, by which point the middle class represented more than half (52 percent) of the country’s total population. China has been eagerly gobbling up Brazilian commodity exports, and the South American giant has discovered massive new oil deposits in its coastal waters. On November 17, Standard & Poor’s boosted its sovereign debt rating.

Yet despite enjoying a lengthy period of responsible economic management under Presidents Fernando Henrique Cardoso (1995–2003) and Lula da Silva (2003–2011), Brazil is still plagued by many familiar problems that have long stifled socioeconomic development throughout Latin America: an inefficient tax code, cumbersome regulations, poor infrastructure, a chronically weak education system, high crime rates, and corruption.

The last item on that list has proved especially frustrating to the current Brazilian president, Dilma Rousseff: Since taking office in January, she has lost five government ministers to corruption charges. The most recent to exit under a cloud of scandal was Orlando Silva, the erstwhile sports minister, who has been accused of embezzling up to $23 million. Now it appears that yet another senior government official, Labor Minister Carlos Lupi, may be forced to resign over alleged ethics violations.

Such corruption scandals represent an unfortunate continuation of the Lula legacy. (Rousseff served as Lula’s presidential chief of staff from 2005 to 2010, and she was his handpicked successor.) Though Lula can claim credit for historic poverty reduction and economic gains, his administration was riddled with scandal. For that matter, “Most of the ministers involved in the corruption scandals [under President Rousseff] were Lula appointees or allies,” as Reuters points out.

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